The Hong Kong government has done it again! Exit tax credit for relocated companies

Hong Kong government"Robbing a business."Zoom in again!

On July 3, the Hong Kong Finance and Treasury Bureau announced thatSummary of the Consultation on the Proposals for the Implementation of a Company Movements Regime in Hong Kong and Legislative Proposals(hereinafter referred to as the "relocation proposal"), which proposes to attract overseas companies to "settle" in Hong Kong by relaxing the requirements on financial statements, extending the period for deregistration, and even providing companies with unilateral tax credits for the purpose of eliminating double taxation, and so on.

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What is a company relocation?

corporate reorganizationis when a company transfers its place of incorporation from one jurisdiction to another. A transfer is not the same as closing down a company and then re-registering it in the new jurisdiction. On transfer, the company continues to exist as a legal entity and its assets and liabilities are transferred to the new jurisdiction.

Speaking after the release of the relocation proposal, Mr. Eddie Hui Ching-yu, Secretary for the Treasury of Hong Kong, said, "The Treasury proposes to set up a mechanism for inward relocation of companies to absorb companies from outside Hong Kong.Make the Hong Kong market a treasure trove for businesses.These companies will generate demand for professional services, investment and jobs, and translate into new development momentum in the local market."

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Hong Kong's "business grabbing" policies are frequently launched

Attracting companies to settle

The Hong Kong Finance and Treasury Bureau (FSTB) announced on July 3 the Proposals for Transfer of Domicile (the Proposals), which provide a simple and convenient way for foreign companies to transfer to other jurisdictions while maintaining the robustness of Hong Kong's business environment. The proposals cover four types of companies: private companies limited by shares, public companies limited by shares, private unlimited companies with share capital and public unlimited companies with share capital.

Improving procedures to facilitate business

The FRC has responded positively to the views expressed during the consultation period by refining the eligibility criteria and procedures for relocation as described below, with a view to facilitating companies to apply for relocation and to continue their operations:
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The requirement for the most recent audited financial statements within three months prior to the date of application has been relaxed to the most recent financial statements within 12 months prior to the date of application. Whether the financial statements are audited or not is subject to the requirements of the place of incorporation.

02 Extension of deregistration period

The original requirement that a relocated company should deregister in its place of registration within 60 days from the date of issuance of the certificate of relocation has been extended to 120 days, and companies are allowed to apply for a further extension of the period where necessary to increase flexibility.

03 Retention of company name and business registration number

If a company has already established a place of business in Hong Kong and is a non-Hong Kong company registered under the Companies Ordinance before the relocation, it can retain its original company name and business registration number after the relocation to facilitate the continuation of its business.

04 Simplification of requirements for consent of members of a company

In order to protect the members of the company, the consent of the members of the company is required to move the register. We have simplified the requirements so that the company should follow the law of the original place of incorporation or the provisions of the constitutional documents of the organization; in the absence of such provisions, the company should obtain a resolution of consent from at least 75% eligible members, either in a meeting or in writing.

05 Ensure proper regulation of financial institutions

Before insurance and banking related organizations apply for relocation, we will put in place a mechanism requiring them to communicate with the financial regulators in Hong Kong and undergo the necessary assessment first to ensure proper transitional arrangements.

"Exit tax" credit for relocating companies

In terms of tax liability, relocating companies can get"Exit tax" creditThe

That is, a company may be taxed on its unrealized profits in the place of incorporation during the process of relocation, and if the actual profits of the same kind are also taxed in Hong Kong after the relocation, Hong Kong will provide unilateral tax credits for the company to eliminate double taxation, which is particularly valued by enterprises.

In addition, the Hong Kong Finance and Treasury Bureau will set out the necessary transitional tax matters in the Inland Revenue Ordinance to clarify the profits tax liability of a company upon relocation of its register of companies, so as to facilitate the company's tax planning.

Provision of a number of financing support measures

As for financing, the HKSAR GovernmentProvision of a number of financing support measuresThe Government has also implemented measures to help newly relocated enterprises to gain easier access to capital support.
Included:

• Venture Capital Fund - provides interest-free loans and venture capital for newly relocated start-ups;

• Green financing - low-interest loans and financing support for businesses engaged in green and sustainable development;

• Bond market development - streamlining the process for enterprises to issue bonds in Hong Kong, lowering issuance costs, etc.

the introduction of a comprehensive corporate registry.which is an important initiative of the Hong Kong Government to enhance Hong Kong's status as a business hub.Hong Kong will actively explore and establish a convenient and effective mechanism to facilitate quality non-Hong Kong companies to relocate to Hong Kong at an early date.

Hong Kong is one of the world's most open and business-friendly economiesIt is an ideal place for local and overseas enterprises, small and medium-sized enterprises as well as start-ups to set up their bases and operations.

If you are planning to do business in Hong Kong, please feel free to contact us!